Wednesday, February 22, 2006

How to rort a hurricane

In the aftermath of one of the worst hurricanes to hit the United States last year, politicians came under intense pressure to compensate for their initial slow reaction and provide significant assistance to the victims. The politicians didn't take too long to notice which way the wind was blowin' and in an orgy of welfare, promised so much money that it felt like election time.

We are talking about the government here, so invariably some of that money was going to be wasted. However, it now looks like that Katrina will not only now go down as one of the worst natural disasters in history but also as a supreme example of government waste and incompetence.

In the immediate aftermath, the main priority was to provide housing for the many who had lost their homes. So the US government decided to commission 26 000 mobile homes at the cost of $900m. Only 1200 of these homes are currently in use and some 11 000 of these homes are now in sinking in the mud in Hope, Arkansas (since regulations restrict the use of mobile homes in a flood plain). Isn't that a shame: government regulations thwarting government welfare.

In addition to the housing, FEMA (the body responsible for coordinating disaster relief), fast-tracked the payment of assistance (including no-questions asked $2000 debit cards or cheques). The Government Accountability Office has uncovered gross examples of fraud involving this assistance:
  • It was able to recieve multiple $2000 cheques using bogus names and addresses via telephone. (It was possible to receive such money even if they had been rejected on the net using the same bogus names and addresses.)
  • It visited a sample of 200 properties that claimants had listed as damaged; 80 of these were bogus, including some which were vacant lots or nonexistent apartments.
  • A group of 17 used 36 different social security numbers to claim $103 000 in assistance. Thirteen of the addresses they used were in the same apartment building. The best evidence also suggests that they weren't living in the area at the time of Katrina.
  • Another individual used 15 different social security numbers to claim only $41 000 in assistance (obviously a bludger compared to the above group). He used 3 different addresses, one of which was a post office box.
  • The computer system automatically flagged applications using multiple social security numbers but FEMA largely did not review these and did not prevent payment from proceeding.
  • Of the 11 000 debit cards issued, 5000 of these were duplicate payments.
  • Some of the more 'essential' products that the debit cards helped finance included a .45 caliber pistol (worth $1300), $1200 of services at a Gentlemen's club, $400 of services at a massage parlour (that had previously been busted for prostitution), a $450 tattoo and $150 at 'Condoms to Go'. (See picture for more.) As the GAO understated, some of these items "do not appear to be items or services that are essential to satisfy disaster related essential needs."
In all some 900 000 of the 2.5 million who received assistance are thought to have engaged in fraud. In addition, to the FEMA rorting, the GAO has busted others for taking excess emergency food supplies (or military 'meals-ready-to-eat') and selling them on ebay.

You can only some it up as 'what a waste!' The only assistance measures that don't seem to have attracted criticism are the private schemes, such as Wal-Mart and Starbuck's quick delivering of water bottles and other supplies. What a shock: private money is more effective than public money (or in other words money that noone has responsibility for).

The only reason some of this waste has been uncovered is because debit cards were able to track purchases. It might be a nice experiment for the dole and the baby bonus to be paid by similar means. Somehow I don't think we'd get different results though.

2 comments:

Luke van Hooft said...

Imagine how bad the rorting would've been if AWB had been in charge!!!

Timothy Bradley said...

At least in this case Matt there were good intentions. And it was gross incompotence that spent the money. Silver lining maybe?

I just got off the phone with a friend from the Commonwealth Dept of ****- who spent all day at the Zoo feeding animals as part of a "planning day."

On the weekend, I learned that SES officers at the Commonwealth Department of **** just had Fox Sports 1 and 2 installed on the TVs in their offices.

(not sure if I should name depts, I'm happy too- but out of respect for my sources, maybe I shouldn't.)

It just doesn't end does it?